Friday, January 25, 2019

The Morning Call

The Morning Call


The Market

The Averages (DJIA 24533, S&P 2642) turned in a mixed performance (Dow down, S&P up).  Both Averages remain below both MA’s and are in short term trading ranges.  However, the pin action of the last couple of days suggests that they are building support at the 61.8% Fibonacci retracement level. 

Volume declined; breadth improved and is getting into overbought territory.

The VIX fell another 3 %.  While it ended above its 200 DMA and in a short term uptrend, it finished below its 100 DMA; now support, if it remains there through the close on Monday, it will revert to resistance.

The long bond was up ½%, ending above both MA’s, in short and intermediate-term trading ranges, in a very short-term uptrend and above its last prior higher low.  

The dollar rose ½%, closing above both MA’s, in a short-term uptrend and within that mid-November to present consolidation phase. 

GLD declined fractionally, but ended well above both MA’s, within a very short-term uptrend and within a short-term trading range---a healthy chart.

 Bottom line: the Averages seem to be building a base at that 61.8% Fibonacci retracement level.  Though they are so overbought right now, at least more backing and filling seems likely.   It is also somewhat bothersome that the VIX still has a relatively positive chart (an indicator of potential negative equity pin action) and the dollar, long bond and gold are performing like safety trades.
            The calendar effects of pre-election years.

            Thursday in the charts.



            Yesterday’s US stats were upbeat: weekly jobless claims fell; the January flash composite and manufacturing PMI’s were better than expected while the services PMI was in line; the January Kansas City Fed manufacturing index was above estimates; the December leading economic indicators were in line but declined; and the Fed continued to allow the run off its balance sheet.

            Overseas, the numbers were abysmal:  January EU consumer confidence came in at -7.9 versus estimates of -6.5 while the January EU flash composite, manufacturing and services PMI’s were worse than anticipated; the January Japanese flash manufacturing PMI was less than forecast.

            Out there in the ruling class fantasy camp:

            Commerce Secretary Ross says that the US and China are miles apart on any trade agreement.

                Draghi downgraded ECB’s outlook for EU economy.
            And the senate failed to pass either version of a bill to reopen the government.

                Bottom line: I didn’t see much positive in yesterday’s new flow.  But maybe the bad news is already discounted.  Or investors are tip toeing through the tulips.  Certainly, the technicals are supporting one or the other scenario---valuations notwithstanding.

My assumption is that, short term, the indices will push toward their prior high.  How high is the $64,000 question.  However, higher equities will be that much more overvalued.

            Why you need to be diversified now.

    News on Stocks in Our Portfolios


   This Week’s Data


            The January US flash composite PMI came in at 54.5 versus estimates of 54.2; the manufacturing PMI was 54.9 versus 53.5 and the services PMI was 54.2, in line.

            The December leading economic indicator fell 0.1%, in line.

            The January Kansas City Fed manufacturing index was reported at 5 versus forecasts of 2.



What I am reading today

            Friday morning humor.

            The world economy and atmospheric carbon dioxide.

                Why everyone seems to have more money than you.

                Why facts don’t change our minds.

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